A recent Court of Appeals decision held that a law firm was unable to recover a portion of a contingency fee when it was terminated by a number of clients following the principal attorney’s indictment.

Splitting the fees isn't a puzzle

In The Eichholz Law Firm PC v. Tate Law Group LLC, 2011 Ga. App. LEXIS 671; 2011 Fulton County D. Rep. 2400 (2011), the two named firms entered into a fee sharing agreement in the representation of a number of clients in a group of product liability actions involving oral sodium phosphate (OSP). The OSP Agreement provided that the two firms would share all fees on a 50-50 basis. Eichholz was indicted on various Federal charges, and all the clients chose to go with Tate Law Group, LLC (“Tate”). At this point, no settlement offers had been made and no contingencies had been satisfied.

After termination, Eichholz assigned its half interest in the fee to Weinstock & Scavo (W&S). Each firm sought to enforce the assignment and claimed entitled to split the contingency fee earned by Tate after a settlement. The Court of Appeals held against Eichholz and W&S on the fee agreement, but held that Eichholz could recover in quantum meruit for any work it performed for Tate towards the joint venture.

This case quoted some pretty standard black letter law in support of its holding. The client must agree to the sharing of fees. Rule 1.5(e)(2). Given the termination of Eichholz by the client, allowing fees to be split when the contingency was not earned would violate the right to the client to such consent and violate public policy. Moreover, W&S’s assignment was made by Eichholz who had no right to the fee, and thus could not assign that which it did not own.

The lesson is a standard continuation of basic rules, even in a slightly unusual set of circumstances.